*https://medium.com/uclcbt/is-bitcoin-really-triple-entry-accounting-df14e26ae3e7*

Juan Ibanez, May 2021

It is often claimed that Bitcoin is revolutionary because it is the first triple-entry accounting system in history. But is this really so?

To answer this, we must first ask what triple-entry accounting is. A quick Google search will provide an answer like the following: triple-entry accounting is using blockchain to build a common ledger between two parties that would typically maintain two separate, redundant, double-entry ledgers.

Triple-entry accounting as a common ledger. Source: Ledgerium.

This is not exactly right. Triple-entry accounting is a design for a common ledger, yes, but not all common ledgers are triple-entry. Triple-entry accounting is a particular model to build a common ledger through signed messages.

Ideated and developed by Ian Grigg and Todd Boyle in the 1990s and early 2000s, triple-entry accounting ensures that two parties can maintain a trustworthy shared record by sending signed messages of offer, acceptance, and validation. If Alice wants to update the shared record, she sends a signed message to Bob over a system called Ivan; if Bob agrees with the update (and his agreement is required), he replies by accepting the update in another signed message over Ivan; finally, Ivan checks the validity of the signature and, if everything is in order, signs off on the record as well.

The result is a signed receipt, which constitutes a common ledger implementing the WYSIWIS (“What You See Is What I See”) principle. In other words, Alice, Bob and Ivan can be certain (due to the nature of how cryptographic signatures work) that they all hold exactly the same record. If the entire set of receipts is read, each party’s balance can be known, which enables huge efficiency effects in accounting.

Blockchain technology, introduced by Bitcoin, presents a way to replace Ivan with a decentralized community of nodes, making the entire system more “trustless” (one does not need to personally trust a third party but only the architecture of the system itself). But is Bitcoin itself triple-entry?

At first sight, it appears that it is not. Stephan February offers an impeccable two-part explanation of how you get from Grigg’s original triple-entry model to peer-to-peer digital cash (i.e. Bitcoin) by replacing Ivan with a distributed timestamp system. However, February himself argues that there is no third signature in this design. Furthermore, there is no second signature either!

February’s account of Bitcoin as a triple-entry system. Source: Twostack.